Holiday Donations – Good for the Spirit, Good for the Tax Form

The winter holidays are in full swing and the new year (and tax season) are just around the corner. As you start your holiday shopping, consider donating some of your unused items, such as coats and toys, to charity. Not only will you be able to help someone in need, but you may also qualify for a deduction on your 2010 tax return.

Before you gather everything into a bag and toss it in the nearest Salvation Army drop box, remember that in order to ensure your donation earns you a deduction, you should document the value of what was donated. The IRS requires that donated clothing and household items must be in “good condition or better” in order for you to receive a tax deduction. Of course, you should still consider donating anything that you no longer use, rather than throwing it away. Additionally, be sure that you get a receipt from the location you donated your items; this receipt should include your name, the charity’s name, the date of donation, the items that were donated, and the value of what was donated. If you give money to a charity, the same guideline applies. You must have some sort of proof of your donation, such as a canceled check or credit card statement. If you donate cash, you should obtain some sort of written statement from the charity with all the same pertinent information included.

Your charitable contributions only qualify for a deduction if you itemize on IRS Form 1040, Schedule A, and only in the year during which you made the contribution. If you mail a check or charge an amount to your credit card on December 30, 2010, that amount will qualify for the year 2010, even if the check is cashed in 2011. You should also be aware that there are limits as to how much you can deduct, although these limits are quite high (typically more than 20% of your gross income).

Finally, not all charitable donations will earn you a tax deduction. Certain private organizations and foreign charities do not qualify. Additionally, donations to individuals, even needy ones, are not deductible. It is important that you consult with your accountant or tax advisor concerning your deductions.

The IRS has provided a useful list of things to be aware of when making charitable donations, available here: http://www.irs.gov/newsroom/article/0,,id=106990,00.html